In this video I will be talking about Intel (INTC -1.11%) and why I believe the company might turn it around. In the last couple of years, Intel has been losing market share to AMD (AMD -1.65%) and NVIDIA (NVDA -1.51%), but it feels as if the company has reached rock bottom, and it might be the perfect time to pick up some shares.
On paper, things look better than what you might hear. The company reported non-GAAP revenue of $18.6 billion, flat year over year, which exceeded January guidance by $1.1 billion. And if this is rock bottom, the only way is up.
Twenty-five years ago, the U.S. manufactured 37% of the semiconductors in the world. Today that number is down to 12%. You've probably heard this before, but there's a global chip shortage, and it's affecting most if not all industries on the planet because semiconductors nowadays are used in almost everything. For example, automakers are expected to lose $60 billion globally due to the chip shortage.
Intel recently announced a $20 billion factory expansion in Arizona. Intel will be offering contract manufacturing jobs, and this will become a core part of the business. Last year Apple (AAPL -1.96%) ditched Intel for TSMC (TSM -0.69%) because Apple is starting to manufacture its own chips and because TSMC can make five-nanometer chips while Intel can't. But with the new factory being built in the United States, Apple might want to diversify where it gets its chips from, and that might be a win for Intel.
Even if Intel can't reach TSMC's level, it can certainly take a significant chunk. But in the meantime, Intel is set to outsource select CPU production to TSMC.
In 2017, Intel acquired Mobileye for $15.3 billion. Mobileye develops self-driving cars and advanced driver-assistance systems. Last quarter, it generated $377 million, up 48% year over year. As we move toward self-driving cars, we can expect this segment of Intel's revenue to grow significantly over the years. As cars and the world in general become more digital, the demand for semiconductors will only increase.
If we can learn something from AMD's comeback in recent years, it's that nothing is impossible. Obviously this isn't a guaranteed success, far from it. Building new factories will take time, and making high-end processors isn't easy, either. But AMD's moving in the right direction.
Do watch the video below for the full insights.
*Stock prices used were the closing prices of June 11, 2021. The video was published on June 13, 2021.